In short,
There is a huge shortage in affordable housing in Amsterdam and there is very little space to remedy this. Add to this that about 10% is owned as speculation objects by criminals with no tenants. Having unlicensed hotels and hostels on top of the 100 or so licensed hotels in these residential areas are a huge burden on the city and its inhabitants and also unfair competition to the businesses that do play by the rules.
Only last year there was a deadly shootout in an unlicensed hotel at the end of my street. If you are a US citizen that is probably a daily occurrence for you, but here in Amsterdam it is kind of a big deal.